(Yicai Global) May 20 -- Li Auto has recently started its own semiconductor manufacturing company, which analysts believe is to bridge the gulf between the algorithms needed by carmakers and the generic chips available as well as to take advantage of the government’s support for the integrated circuit sector.

Sichuan Ideal Zhidong Technology is owned by Leading Ideal HK, an associate of Beijing-based Li Auto, according to corporate registration data. Its business scope includes IC chip design and services.

"Many car companies have noticed that just developing software and algorithms is not enough," Ding Ming, technical director of an autonomous driving company, told Yicai Global. As autos get smarter and smarter, they need custom-made chips to match their algorithms.

Also, China is promoting the semiconductor industry at present and market entrants can benefit from supportive policies in the short term, he added.

Li Auto has yet to confirm the news to Yicai Global.

Other analysts believe that Li Auto could be developing its own chips to cope with the global chip shortage. In October last year, the firm said that due to the impact of Covid-19 outbreaks in Malaysia, there was a serious shortage of millimeter-wave radar chips and some models had to be delivered "incomplete."

Li Auto’s decision to make its own chips is not necessarily related to the shortage though, Ding said, adding that as the semiconductor development cycle is long, the shortage will most likely have been resolved by the time the chips are ready.

Many new energy vehicle makers have entered the IC field recently. Leapmotor Technology released its own smart driving chip Lingxin 01 in 2020. And earlier this year Geely Automobile Holdings said that it will start mass production of its own smart cockpit chip. Changan Automobile has also announced its intention to start a company to develop chips and algorithms.

Others are buying stakes in semiconductor firms. SAIC has invested in several chip companies including Horizon Robotics, and Guangzhou Automobile Group bought into Suzhou Flagchip Semiconductor earlier this year.

Editor: Kim Taylor